What to do about saving if you are young (and not earning lots)

Written by Jessica Georgios on 21st November 2017

This is a paid post, brought to you by Moneyfarm


In today’s economic climate, it is difficult to make big gains on savings.

Since the crash of 2007, interest rates have been kept under tight control, which is great news for borrowers, but not so great for savers.

Even in the last two or three years, interest rates offered on traditional savings accounts have been lowered further, and are now at rock bottom. They rose slightly this month, however economists do not expect a sudden return to rate rises. Slow and steady, if they’ll continue to go up at all, is the message.

If you’re interested in squirrelling away some money, you could visit your local bank and enquire about what rates or on offer. However there’s a distinct possibility that your bus fare or petrol costs might actually outweigh the amount the bank would pay you on said savings. Literally.

High street savings options

For millennials (you’ll know if you are one), saving can be particularly difficult. One of the best options young people have, assuming they want to buy a house, is the Help to Buy ISA. These allow young savers to make a decent enough rate of interest plus a 25 per cent bonus from the Government when you come to buy a home. Yes, you read that correctly. The government will add a quarter of anything you save towards your house deposit. That’s a gift horse no one should look in the mouth.

You can find more information on the Help to Buy ISA here.

Interest on current accounts

Another way people can make a little interest on their savings is to make the most of the current account market.

While current accounts don’t as a rule offer interest on balances, some actually offer higher rates than on savings at the moment (some banks offer more interest because they want people to switch to them and remain customers).

The Santander 123 current account is perhaps the best known of these.

Cash vs Stocks and Shares

There is hope for savers – they could invest instead, with an Investment ISA.

Many people don’t realise, but you can actually use your annual ISA allowance in either cash, or stocks and shares (or in the new Innovative Finance, or P2P ISA). Sticking to the two main options, this means either keeping it as accessible money which can be withdrawn at any time and is covered by the Financial Services Compensation Scheme, or investing it in shares on the stock market.

But what is the benefit of stocks and shares, as opposed to a traditional ISA? For those with an appetite for risk, investing in stocks and shares offers investors the chance to make a return on their savings where traditional savings account are letting them down.

Where Cash ISAs and Instant Access Savings have continued to offer lower rates following the recession, investing in stocks and shares has actually bucked the trend, and provided a growing income. With inflation continuing to rise this has meant those choosing the investment route have NOT seen their money eroded.

If you’re prepared for an element of risk, stocks and shares can be a a fun and rewarding way to beat the low interest rate market, so why not check it out.

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